CLIF DAVIS and TIMOTHY G. GAUTHIER, comprising the Oregon and Southwest Washington IBEW-NECA Electrical Workers Audit Committee, Plaintiffs-Appellants Cross-Respondents,
F.W. FINANCIAL SERVICES, INC., a Washington corporation, Defendant-Respondent Cross-Appellant.
Argued and submitted on December 10, 2012.
Multnomah County Circuit Court 110404916 Nena Cook, Judge pro tempore.
Michael J. Morris argued the cause for appellants-cross-respondents. With him on the briefs was Linda J. Larkin.
Joseph A. Field argued the cause for respondent-cross-appellant. On the briefs were Jonathan C. Smale and Field Jerger LLP.
Before Sercombe, Presiding Judge, and Haselton, Chief Judge, and Hadlock, Judge.
HASELTON, C. J.
Plaintiffs Davis and Gauthier (collectively, Davis) are judgment creditors who had garnished accounts receivable of Dryer Electric, Inc. (Dryer)--accounts receivable in which F.W. Financial Services, Inc. (FWFS) held a perfected security interest. Davis sought a declaration that his interest in the collected funds was superior to FWFS's interest in Dryer's accounts receivable, and FWFS answered, seeking a declaration that its interest was superior and counterclaiming that Davis was liable for conversion of the collected funds plus prejudgment interest. On cross-motions for summary judgment, the trial court denied Davis's motion, granted FWFS's motion, declared that FWFS had a superior interest in the collected funds, and determined that Davis had converted the funds. The trial court subsequently entered a general judgment that provided a money award to FWFS, but did not allow prejudgment interest. Davis appeals, assigning error to the respective rulings on the parties' motions for summary judgment. FWFS cross-appeals, assigning error to the trial court's denial of prejudgment interest. We affirm on both the appeal and the cross-appeal.
"On review of cross-motions for summary judgment, we examine whether there are any disputed issues of material fact and whether either party was entitled to judgment as a matter of law." Vision Realty, Inc. v. Kohler, 214 Or.App. 220, 222, 164 P.3d 330 (2007). Here, neither party asserts that there were disputed issues of material fact that would preclude summary judgment. Instead, each party asserts that its respective interest in the collected funds is superior as a matter of law. FWFS asserts that its prior perfected security interest in Dryer's accounts receivable continued in the proceeds of those accounts and that, as a secured party, FWFS was entitled to trace and recapture those funds from Davis, a lien creditor who had garnished Dryer's accounts receivable. Conversely, Davis asserts that, because FWFS had not enforced its remedies under its security agreement with Dryer as of the time Davis executed on his judgment lien, he took the collected funds free of FWFS's security interest.
The material historical facts of this case are undisputed. FWFS functioned as a commercial lender to Dryer, an electrical business. On November 21, 2002, Dryer executed a promissory note and security agreement, which included Dryer's accounts receivable as collateral to secure a line of credit and "also to secure any and all other liabilities * * * now existing or hereafter arising from [Dryer] to [FWFS]." Dryer was obligated to deposit collections of its accounts receivable into a cash collateral account maintained and controlled by FWFS. The security agreement provided, in part:
"5.12 Notification of Account Debtor. At any time prior to or after default by [Dryer], [FWFS] may notify the account debtors on any of the collateral to make payment directly to [FWFS]. [Dryer], if [FWFS] so requires, shall notify the account debtors of [FWFS's] security interest in their accounts. Until such time as [FWFS] by written notice to [Dryer] elects to exercise said right of notification, [Dryer] is authorized as agent of [FWFS], to collect and enforce the accounts.
"* * * * *
"7.1 Upon the occurrence of any event of default, [FWFS] may at [FWFS's] option and without prior notice declare all notes and other obligations of [Dryer] secured by this agreement immediately due and payable and shall have and may exercise each and all of the rights and remedies granted by the said notes, this agreement, and the Uniform Commercial Code of Oregon [(UCC)]. All remedies of [FWFS] shall be cumulative. * * *
"* * * * *
"8.3 Duties With Respect to Collateral. [FWFS] shall have no duty:
"(a) To collect the collateral or any proceeds;
"(b) To preserve rights of [Dryer] or others against prior or other parties;
"(c) To realize on the collateral in any particular manner or seek reimbursement from any particular source[.]
"* * * * *
"8.4 Non-Waiver By Secured Party. [FWFS] shall not be deemed to have waived any of [FWFS's] rights under this or any other agreement or instrument signed by [Dryer] unless the waiver is in writing signed by [FWFS]. No delay in exercising [FWFS's] rights shall be a waiver nor shall a waiver on one occasion operate as a waiver of such right on a future occasion."
On March 1, 2004, FWFS filed a financing statement with the Oregon Secretary of State, in accordance with ORS 79.0501 to 79.0516. Dryer and FWFS periodically executed subsequent documents to reflect renewals or extensions of the line of credit or other changes in terms such as the loan fee or interest rate. FWFS filed additional and timely financing statements to maintain its perfected security interest in Dryer's accounts receivable. See ORS 79.0515 (providing that, generally, "a filed financing statement is effective for a period of five years after the date of filing, " and that "to continue the financing statement or effective financing statement, the secured party may file a continuation statement or an initial financing statement").
Dryer experienced financial difficulties and defaulted on its obligations to FWFS and, on June 9, 2009, FWFS issued Dryer a written notice of default, stating:
"You have repeatedly failed to make deposits to the [FWFS] account, as required, of the collections of your accounts receivable. * * * [Y]ou are hereby given notice of enforcement of the 'Default Rate' of interest which is hereby accelerated to twenty-four percent (24%) effective June 10, 2009. At this time, we are not accelerating the maturity and thereby calling for full payment of the principal and interest. However, we remind you that is within the rights of [FWFS] ...